Wednesday, September 30, 2015

Jim Rickards vs. Jim Rickards on the timing for a "Currency Event"?

An interesting thing has popped up related to Jim Rickards prediction regarding the timing of the next big financial crisis. I have followed Jim Rickards for years and never heard him give any kind of hard date for this event to take place. He usually just says he cannot predict the exact timing and leaves it at "sometime in the next 3-5 years."

Recently however, he left a tweet on his twitter feed which seemed to indicate he was ready to announce that September 2016 is the time frame to watch for. I noted that on this blog as you can see here.

Also recently, Jim was asked directly about the timing for his predictions. In a very recent webinar, he once again left the timing open to sometime in the next three to five years with no mention of September 2016.

I am not sure what to make of this. We should note that his twitter message is a teaser asking people to subscribe to his newsletter. In the teaser he shows an image of an October 2015 issue article which clearly says that the date to watch for is September 2016. I don't know if this is just one of those teaser type headlines designed to get people to purchase the newsletter or if he really is setting a hard date of September 2016 since I don't have access to his paid newsletter.

Unless he comments on this further in public, I will assume he really is setting September 2016 as his hard time frame since that is what the image of his article shows. It could be that Jim is willing to give a hard date to those who subscribe to his newsletter and is not willing to do that in public interviews.

Below is the Q&A from the recent webinar where he answers the timing question. Tomorrow we will look at Jim Rickards vs. the BIS (Claudio Borio of the BIS) to see if Jim's prediction about the IMF stepping in like a global central bank conflicts with recent comments by Claudio Borio of the BIS. Mr. Borio recently said a global central bank is "out of the question."

Jon: Before we turn to Alex here, there’s been a consistent vocal minority, of which you’re a part, predicting an imminent financial crisis. You’re not saying when it will happen, but you’ve said again and again that we’re in for a financial crisis even beyond the scale of 2008. I often hear people speaking rather dismissively of “the doomsday crowd.” You pointed out recently that some of the voices in this so-called doomsday crowd include the Bank for International Settlements, the IMF, and the G20. I wonder if you could elaborate on that a little bit?

Jim: Sure. You’re right, Jon. I do see a catastrophic collapse of the international monetary system. I don’t think it’s inevitable; I don’t think it has to happen. I just think it’s very likely that it will happen, because I don’t see any signs that the remedial or preventive steps are being taken.

I can give you four or five things that could be done tomorrow that would prevent it from happening including breaking up the banks, banning derivatives, or banning high-frequency trading. None of these things really serve any particular purpose other than to enrich the individuals who are behind them. They don’t do society any good, so getting rid of them would lead to a more stable system that would still serve everyday investors in terms of market liquidity and being able to trade stocks in secondary markets, etc., which was the original purpose of a stock market.

I think there are things that could be done to prevent it, but then as an analyst, you have to say, “Okay, is anyone doing those things? Is anyone taking those steps?” The answer is no. Therefore, I’m back to the other branch of the tree, and that is if we don’t have systemic reform, we will have systemic collapse. That’s very easy to see. When I say easy, I mean there are recursive functions, analysis, science, and other equations behind it, but it’s a pretty straightforward analysis.

As far as timing, you cannot call it to the day, the month, or the year. I think over a five-year horizon, it’s more likely than not; over a three-year horizon, still more likely than not. But it’s not the same as saying it would be next month or next week, although it could be. That’s the interesting thing about it. When I say it’s more likely than not in three years, I don’t rule out the fact that it could happen tomorrow. I’m not predicting tomorrow; I’m just saying that that’s part of the analysis.

Having said that, I do not consider myself a doom-and-gloomer; I do not consider myself part of the doomsday crowd. When this catastrophic collapse that I’m describing happens, it will not be the end of the world. We will not all be living in caves eating canned goods with our trigger fingers on machine guns. I don’t think that’s true at all. I think we’ll still be in our houses, we’ll still wake up, and life will go on, but it will be a different world financially.

We’ll see extreme responses. We’ll see an emergency summit conference of leaders not unlike the November 2008 G20 conference in Washington that George Bush and Nicolas Sarkozy put together on fairly short notice. We’ll see a reformation of the international monetary system, maybe in a venue something like Bretton Woods. I would like to see that happen today in a rational forward-leaning way before the collapse happens.

As mentioned earlier, I recently spoke to Ben Bernanke, former Chairman of the Federal Reserve. I also had a conversation with John Lipsky. John is a very fascinating individual and a great guy. He is the only American ever to head the IMF.

People who are familiar with the IMF say, “Wait a second, the IMF job is reserved for non-Americans by tradition.” It’s not a law as such, but when Bretton Woods was set up, there was a sort of handshake deal that the head of the World Bank would always be an American and the head of the IMF would always be non-American. That’s been true for all these years, and yet John Lipsky, an American, was briefly head of the IMF for only a few months.

It was after Dominique Strauss-Kahn was arrested on an airplane in JFK and faced some fairly scandalous charges. Normally, the IMF succession is very orderly, but that was a little disorderly. Dominique had to resign. John was the number two guy, Deputy Managing Director, so he became Acting Head for a short period of time until they could decide on Christine Lagard, who came in a few months later.

Having spoken to the former Chairman of the Fed and the former head of the IMF just a few weeks apart – one conversation in Korea, one in Washington – they both used the same word to describe the international monetary system. That word was “incoherent.” I don’t think they rehearsed that for my benefit; I think it’s just the word that comes to mind among the power elite as to what’s going on.

This is indicative of the state of affairs and points to what you were saying, Jon. If you were to ask me who really runs the world of finance or what are the most powerful establishment institutions in the world, you could have the Fed on that list in terms of the elites and look at the Bilderberg Conference (I’ve spoken to Bilderbergers about this), but the three most powerful multilateral institutions would be the Bank for International Settlements (BIS) in Basel, Switzerland, the International Monetary Fund (IMF) based in Washington, and the Group of 20 (G20), which is a floating crap game of developed economies and BRICs and some emerging markets that meet all over the world on a rotating basis.

All three of them have issued very dire warnings. It’s not just, “Oh, gee. We better slow down. We better do this or that.” It’s “No, we are looking at a highly unstable financial situation.” They practically threatened Janet Yellen. Christine Lagard gave her multiple warnings. The G20 finance ministers just met in Turkey and issued a warning. These are very blunt warnings.

I hate to blame the victim, and I do sympathize with people who lose a large percentage of their net worth because they were all in the stock market and didn’t have some gold. However, when it happens, as much as one might sympathize with any investor who’s not prepared, there’s really no one to blame, because you have been warned.
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